In 2025, deals are harder to close than in prior years, but an uptick in M&A activity may be coming in Q4 and early 2026.

A big determinant will be what happens with interest rates. Many buyers, particularly those in private equity, have their fingers crossed for rate cuts later in the year or early next. If that happens, the flow of transactions may accelerate.

In the meantime, considerations like due diligence are growing more intense in today’s regulatory and economic environment.

Hospice News sat down with Les Levinson, co-chair of the Transactional Health Law Group with the Law Firm or Robinson+Cole, to discuss the trends and what the market might see through 2025 and into 2026. 

Right now, what does the overall hospice market look like for M&A?

There are some people that will tell you that they thought the hospice market was a little overheated, and it’s quieted down. But then there’s some people saying, “Hey, we’re really looking actively at hospice again.” We have three hospice deals we’re working on now, mid-market hospice deals. We feel like there’s still a fair amount of bandwidth in the hospice market.

There continues to be a good level of interest in hospice. Is it as frothy as it was in 2021 and 2022? Probably not, I think we all went into 2025 feeling that there’s a lot of capital available; the election is over. It feels like we’re going to have more of a pro-business, less regulatory, invasive environment, but that’s been a little bit of a mixed bag. It seems like on the antitrust front that the administration, at the moment, seems to be keeping more of the status quo, but on some of the other regulatory issues they seem to be taking more of a hands-off approach

So far, we haven’t had the [interest] rate cuts that I think everybody was hoping for, and for private equity investors, interest rates are really an important factor, because leverage is always a critical part of the deal.

Is there more you could say about how the current economic or regulatory environment is affecting the market, whether it’s tariffs, interest rates, the payment updates?

I don’t think it’s tariffs, because I think the verticals we’re talking about, hospice and then home care, are not really impacted by tariffs, other than sort of economic uncertainty, which isn’t a great thing.

Health care is a defensive investment and tends to draw more investment dollars that might have gone somewhere else. Interest rates just continue to be the really most important factor for investors that leverage.

So if you go back to 2021 and half of 2022, we basically had a zero interest rate environment. So if you’re an investor and you’re looking at risk, whether it’s reimbursement risk or company risk, you’re basically borrowing the delta of the risk in the transaction rather than funding it with equity. Your risk tolerance is different.

When you can’t get that debt money, and now you’ve got to fund something with equity, you’re looking at things a little bit differently. That’s a big reason for why due diligence processes have become more comprehensive, and they’ve become longer and more thorough. And that’s not necessarily a bad thing.

Thinking about valuations, for a while there hospice had record high multiples. I’ve heard that lately there’s been some differentiation from buyers’ expectations regarding valuation versus the sellers. Are you seeing them kind of match up a little better these days, or is that dichotomy still there?

It’s getting much more rational. We’re not getting clients or prospective clients who are talking to us about a 2021 valuation. It’s much closer to where the market is. The EBITDA differentiator still holds true, and that’s been true for a long time. Meaning: If you’re a $5 million or below EBITDA company, you’re going to get a lower valuation. If you’re a five-plus, a little bit better, and if you’re a 10-plus, you know you’re going to get the strongest valuations. 

And some of that also is potentially geography, or maybe an add to a strategic or a platform. If a private equity fund really sees a particular company and says, “This is a really solid, well managed company,” then they are willing to pay a little bit more for it.

What are some of the trends you’re seeing going beyond deal volume?

We’re continuing to see a lot of tuck-in activity, and they can be sizable. That’s where the market has been for a bit, and I think it’s going to continue. I think if you get one or two sizable exits, that will have a tendency to kind of set the market, and then you might start seeing more platforms coming to market.

WIth some of the bigger companies that have been aggregating assets for a while, people have been expecting that they were going to exit. That hasn’t happened for a lot of reasons.

It’s a lot easier to do a bolt on, where either you have the capital in reserve or you’ve got a line of credit that you can tap, versus going to have to put a fund raise together. If you can’t write the check yourself, you’re gonna have to put together a lending consortium. It’s just been more challenging.

Do you have any predictions as far as what the market will look like in Q4 or going into 2026?

For the balance of 2025 I am expecting to see an uptick in activity. If we’re going to get that uptick, it’s going to come pretty soon, because we’re just going to run out of calendar bandwidth if deals don’t get started as we get into the next to next quarter. There are deals that I know are being shopped now, so I’m not going to be surprised if we start seeing some of those come to market.

If we get a [interest] rate cut, or a sense that there’s one coming soon, that may inspire more confidence for people to push the button. A rate cut would accelerate M&A rather than diminish it.